Week 5 takes you through the federal payroll process. For an S corporation that pays wages to its owner or other employees, payroll compliance is separate from the annual Form 1120-S filing.
Learning Objectives
- Understand gross pay and net pay.
- Understand employee and employer payroll taxes.
- Recognize the purpose of Form 941.
- Connect payroll records to quarterly federal reporting.
Primary IRS Materials
- Publication 15, Employer’s Tax Guide
- Form 941 and its instructions
- Publication 15-A, where relevant
Payroll Flow
A simplified payroll cycle may include:
Gross wages → employee tax withholding → employer payroll tax obligations → payroll tax deposits → Form 941 reporting → net paycheck.
Practice Exercise
Take a fictional $500 monthly gross paycheck and trace each component. Identify employee Social Security and Medicare withholding, employer matching amounts, any applicable federal income tax withholding, and the amount ultimately paid to the employee.
End-of-Week Goal
You should understand why payroll taxes and payroll filings cannot be replaced by simply recording an owner’s withdrawal as a distribution.